The aggregate demand curve shows the
A) inverse relationship between the price level and the quantity of real GDP purchased.
B) direct relationship between the price level and the quantity of real GDP produced.
C) inverse relationship between interest rates and the quantity of real GDP produced.
D) direct relationship between real-balances and the quantity of real GDP purchased.

Question

Quizplus · Accepted Answer

The aggregate demand curve shows the inverse relationship between the price level (measured by the GDP deflator) and the quantity of real GDP purchased, holding all other factors constant. As the price level decrease, consumers will be able to buy more goods and services, increasing demand and moving up along the aggregate demand curve. Conversely, as the price level increases, consumers will reduce their demand for goods and services, shifting the aggregate demand curve downward.

The Aggregate Demand Curve Shows the